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Future Financing of the European Union HOUSE OF LORDS European Union Committee 6th Report of Session 2004-05 Future Financing of the European Union Report with evidence Ordered to be printed 28 February 2005 and published 9 March 2005 Published by the Authority of the House of Lords London : The Stationery Office Limited £24.50 HL Paper 62 The European Union Committee The European Union Committee is appointed by the House of Lords “to consider European Union documents and other matters relating to the European Union”. The Committee has seven Sub-Committees which are: Economic and Financial Affairs, and International Trade (Sub-Committee A) Internal Market (Sub-Committee B) Foreign Affairs, Defence and Development Policy (Sub-Committee C) Environment and Agriculture (Sub-Committee D) Law and Institutions (Sub-Committee E) Home Affairs (Sub-Committee F) Social and Consumer Affairs (Sub-Committee G) Our Membership The Members of the European Union Committee are: Lord Blackwell Lord Neill of Bladen Lord Bowness Lord Radice Lord Dubs Lord Renton of Mount Harry Lord Geddes Lord Scott of Foscote Lord Grenfell (Chairman) Lord Shutt of Greetland Lord Hannay of Chiswick Baroness Thomas of Walliswood Lord Harrison Lord Tomlinson Baroness Maddock Lord Woolmer of Leeds Lord Marlesford Lord Wright of Richmond Information about the Committee The reports and evidence of the Committee are published by and available from The Stationery Office. For information freely available on the web, our homepage is: http://www.parliament.uk/parliamentary_committees/lords_eu_select_committee.cfm There you will find many of our publications, along with press notices, details of membership and forthcoming meetings, and other information about the ongoing work of the Committee and its Sub-Committees, each of which has its own homepage. General Information General information about the House of Lords and its Committees, including guidance to witnesses, details of current inquiries and forthcoming meetings is on the internet at http://www.parliament.uk/about_lords/about_lords.cfm Contacts for the European Union Committee Contact details for individual Sub-Committees are given on the website. General correspondence should be addressed to the Clerk of the European Union Committee, Committee Office, House of Lords, London, SW1A OPW The telephone number for general enquiries is 020 7219 5791. The Committee’s email address is [email protected] CONTENTS Paragraph Page Abstract 7 Chapter 1: The European Union at a Crossroads 1 9 Overview of the new financial framework 2007-2013 11 Chapter 2: The EC Budget Debate in Context 9 12 The scope of the debate 9 12 Box 1: GDP, GNI & ‘Own Resources’ 12 The size of the EC Budget 11 12 Figure 1: Public expenditure in 2003 as % of GDP 13 Criticism of the EC Budget 13 13 Box 2: The Sapir Report 14 Agriculture 17 14 The Structural Funds 20 15 Political role of the Budget 25 16 Different perspectives on the Budget debate 29 16 Keeping the Budget small…and effective 32 17 The Budget Framework: the Financial Perspective 34 17 Pros and Cons of the current system 35 18 Agreeing the Financial Perspective 2007-2013 38 18 Timing of the agreement 42 19 Chapter 3: The Common Agricultural Policy 47 21 Figure 2: Developments in Community Spending 21 Figure 3: CAP receipts per country in 2003 (€ million) 22 Figure 4: CAP receipts per capita in 2003 (€) 22 Chapter 4: Structural and Cohesion Funds 63 26 Table 1: Total Allocations of Structural and Cohesion Funds 2000-2006 26 Map 1: Structural Funds 2000-2006 27 The impact of enlargement 65 28 Table 2: Relative wealth in the EU 25 28 The Commission proposal 67 29 Box 3: EU Regional Policy Funding 2000-2006 30 From intervention to permanent policy 72 30 Evaluating the Structural Funds 76 31 Devolving Regional Policy 79 32 Chapter 5: The Lisbon Agenda 83 34 Chapter 6: Other Spending Categories 96 37 Citizenship, freedom, security and justice 96 37 The EU as a global partner 98 37 Chapter 7: Own Resources and a European Union Tax 102 39 Chapter 8: The United Kingdom Abatement and a Generalised Corrective Mechanism 112 41 Figure 5: Net contributions to the Budget 2003 41 Figure 6: Net contributions to the Budget 2003 (%GNI) 42 Table 3: Estimated net budgetary balances (average 2008-2013) in % of GNI 44 Chapter 9: Summary of Conclusions 131 47 The EC Budget Debate in Context 131 47 The Common Agricultural Policy 141 48 Structural and Cohesion Funds 144 48 The Lisbon Agenda 151 49 Other spending categories 159 50 Own Resources and a European Union Tax 161 50 The United Kingdom Abatement and a Generalised Corrective Mechanism 164 50 Appendix 1: Sub-Committee A (Economic and Financial Affairs, and International Trade) 52 Appendix 2: List of Witnesses 55 Appendix 3: Call for Evidence 57 Appendix 4: Glossary of Acronyms and Technical Terms 59 Appendix 5: Reports 60 Appendix 6: Total General Government Expenditure as % of GDP 61 Appendix 7: Total EU Expenditure 1992-2003 62 Appendix 8: Comparison Between the Evolution of National Budgets and EU Budget 63 ORAL EVIDENCE Professor Iain Begg, Visiting Professor, European Institute, London School of Economics & Political Science and Ms Katinka Barysch, Chief Economist, Centre for European Reform Written evidence from Professor Iain Begg 1 Oral evidence, 7 September 2004 4 The Rt Hon the Lord Lawson of Blaby Oral evidence, 14 September 2004 16 Professor Helen Wallace, CMG FBA, Director of the Robert Schuman Centre for Advanced Studies, European University Institute, Florence Oral evidence, 14 September 2004 21 Mr Martin Wolf, CBE, Associate Editor and Chief Economics Commentator, Financial Times Oral evidence, 19 October 2004 28 Ms Carleen Keleman, Programme Director, Objective One Partnership for Cornwall and the Isles of Scilly, Mr Mark Yeoman, Deputy Director, Objective One Partnership for Cornwall and the Isles of Scilly and Ms Carolyn Webster, Business Development Manager, Jobcentre Plus Oral evidence, 19 October 2004 35 Commissioner Michaele Schreyer, Member of the European Commission and Mr James Spence, Deputy Head of Cabinet of Commissioner Schreyer Oral evidence, 25 October 2004 42 Mr Daniel Gros, Director, Centre for European Policy Studies and Mr Jorge Nunez Ferrer, Associate Researcher, Centre for European Policy Studies Oral evidence, 25 October 2004 49 Mr David O’Sullivan, Secretary-General of the European Commission Oral evidence, 25 October 2004 56 Professor André Sapir, Adviser, Group of Policy Advisers, Group of Economic Analysis, European Commission Oral evidence, 26 October 2004 64 Mr Philip Lowe, Director-General, Competition Policy, European Commission Oral evidence, 26 October 2004 71 Mr Graham Meadows, Director-General, Regional Policy, European Commission and Mr Manfred Beschel, Head of Unit, United Kingdom and Latvia, Regional Policy Directorate-General, European Commission Oral evidence, 26 October 2004 76 Ms Ruth Lea, Director, Centre for Policy Studies, Professor Tim Congdon, CBE, Managing Director, Lombard Street Research and Professor Patrick Minford, CBE, Professor of Applied Economics, Cardiff University Oral evidence, 2 November 2004 82 Mr Terry Wynn, MEP and Herr Reimer Böge, MEP Oral evidence, 9 November 2004 97 Mr Douglas Alexander MP, Minister of State for Trade, Investment and Foreign Affairs, Mr John Neve, Director, Regional European Funds and Mr Chris Kirby, Controller of Finance, DTI Oral evidence, 30 November 2004 106 Mr Stephen Timms MP, Financial Secretary to the Treasury, Ms Melanie Dawes, Director, Europe and Chris Austin, Head of EU Finances, HM Treasury Oral Evidence, 7 December 2004 118 WRITTEN EVIDENCE Dr Robert Ackrill, Nottingham Trent University 128 Mr Tim Ambler, Senior Fellow, London Business School 131 Dr Brian Ardy, London South Bank University 134 Professor John Bachtler, University of Strathclyde 139 Mr Graham Bishop, Graham Bishop.Com 157 Blackburn with Darwen Borough Council 162 Centre for Global Education (NI) and the European Forum, St Mary’s University College, Queen’s University of Belfast 163 Convention of Scottish Local Authorities 167 Cornwall County Council 169 Cumbria County Council 170 Mr Brendan Donnelly, The Federal Trust 171 East Midlands Development Agency 173 English Nature 181 European Rural Exchange 185 Professor Wyn Grant, University of Warwick 187 Professor Paul G Hare, Heriot-Watt University 188 Dr Patricia Garcia-Duran-Huet, University of Barcelona 190 Professor Roger Levy, Glasgow Caledonian University 192 Local Government International Bureau 195 Dr Janet Mather, Manchester Metropolitan University 199 Dr Mary C Murphy, University College Cork 203 Scottish Executive 205 Sefton Council 208 South of Scotland Alliance c/o Scottish Borders Council 211 Dr Carmen Raluca Stoian, University of Kent 213 Welsh Assembly Government 216 NOTE: References in the text of the report are as follows: (Q) refers to a question in oral evidence (p) refers to a page of written evidence ABSTRACT ___________________________________________________________________________________________________________________________________________________________________________________________________________________ It is the first time that 25 Member States of the European Union will be negotiating the seven-year financial package, known as the Financial Perspective. Over the course of that seven year period (from 2007 to 2013) it is expected that the European Union will enlarge further to include Bulgaria and Romania. The accession of Turkey is possible a few years later. The European Union must anticipate these changes. The Commission’s proposals
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